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St. Thomas, Ontario and beyond

City council gives green light to St. Thomas Energy merger; we remain in the dark on status of debt

Municipal councils in St. Thomas and Chatham-Kent this week gave their blessing to the merger of St. Thomas Energy and Entegrus. The utility marriage now needs approval from the Ontario Energy Board (OEB), likely to happen late this year with a target merger date of Jan. 1, 2018.

However, neither the city treasurer nor the acting CEO at St. Thomas Energy are forthcoming with details on how the long-term debt – reported to be greater than $20 million – and the more than $5 million owing the city on the collection of water bills will be accounted for in the merger.

St. Thomas Energy will become a 20 per cent stakeholder in the new entity, which will service close to 60,000 customers in southwestern Ontario, making it the 11th largest utility in the province.

Based in Chatham, Entegrus currently services Chatham-Kent, Strathroy, Mount Brydges, Parkhill, Dutton and Newbury. It provides general administrative services in the areas of customer care, billing, call centre operations and collection services for companies focused on electricity supply, transmission and distribution, energy and renewable energy, and water supply.

Both St. Thomas Energy acting CEO Rob Kent and Entegrus president and CEO Jim Hogan explained the 20 per cent ownership status was determined through each of the shareholders having third-party evaluators go through all of the companies.

“They (Entegrus) have a number of affiliate companies,” explained Kent. You go through the evaluation process and you come to an agreement on what those values are and our proportion of that came to about 20 per cent.”

“The City of St. Thomas will be a shareholder and the Municipality of Chatham-Kent will be a shareholder,” added Hogan. “We also have a shareholder, Corix Utilities (eight per cent), and they’re out of London and they have a lot of offices in Ontario. It’s a merger and they will be the shareholders of the organization.”

Jim Hogan, president and CEO of Entegrus.

As it stands today, St. Thomas Energy has close to 30 per cent of the 58,000 total customer base of the combined entities.

The deal includes a “three-year, across-the-board employment deal” for workers at both utilities.

“Everyone’s employees are being treated equally,” stressed Kent.

And what becomes of the St. Thomas utility’s parent company, Ascent Group?

“We’ll have to go through that once we get all of this done,” advised Kent. “It’s basically inactive right now, anyway.”

No matter the final determination on the status of Ascent, the name will no longer live on in St. Thomas, said Kent.

“We haven’t gone through what the branding will look like, but it won’t be Ascent on the building.”

As to the thorny issue of debt, neither Kent nor city treasurer David Aristone chose to elaborate on possible financial resolution.

“Without getting into any of the mechanics of it, the utility is being properly leveraged from how the OEB would allow it. And that is taking care of some of the issues.”

With than $5 million owing the city for collection of water bills dating back to at least 2014, Kent indicated that debt is on the books of Ascent Group and not St. Thomas Energy.

“That debt was restructured into AGI (Ascent Group),” explained Kent. “So there is no water/sewer debt imbedded in the merger and all of that is being taken care of with the city.”

“That will all be worked out and disclosed when the actual merger takes place,” added Aristone. “Once the application is made (to the OEB) then we’ll roll out physically what’s going to happen before the merger takes (effect). So I can’t disclose that because it hasn’t been finalized.

“There has to be some type of accounting within the City of St. Thomas. But it won’t occur until after . . . the OEB approves the merger. There are things within the merger agreement that have to occur before we definitely know how that all rolls out.”

Regardless of the status of Ascent Group, Aristone stressed the water bill collection would not be written off.

“Nothing is going to be written off, with regards to the city. There’s bank debt too, but Rob (Kent) is better to speak to that, because I’m not privy to all those numbers. The only thing I can say is nothing is being written off at the city. Any of the debt we have with AGI, I can guarantee you none of that is being affected. It may be converted into something else. But I really can’t release that.”